Inflation in January ballooned to 2.97%

JAKARTA (JP): Inflation in January rose to 2.97 percent from 1.42 percent in December, sending the year on year inflation to 70.66 percent, the Central Bureau of Statistics (BPS) said on Tuesday.

BPS chief Sugito Suwito said the higher inflation was primarily caused by the soaring prices of foodstuffs and clothes during the New Year and Idul Fitri holidays.

"Our empirical data shows that the month of the Idul Fitri holiday always sees higher inflation," he said.

BPS reported that food prices jumped by 6.79 percent, while clothing prices rose by 5.64 percent.

The price of processed foods and beverages, tobacco and cigarettes increased by 1.05 percent, housing prices rose by 1 percent, health products went up by 0.72 percent and the price of transportation and communications rose by 0.76 percent. However, prices in the educational, recreational and sports sectors declined by 0.27 percent.

Sugito added that inflation in January and February was usually higher because of traditionally low rice harvests during these months.

"The high harvest season will not start until March," he pointed out.

"Inflation for the coming months is expected to decline and we may even see deflation in March with the harvest season and lower transportation costs," he said.

Transportation costs were allowed to temporarily increase in January during the week of the Idul Fitri holiday.

Sugito forecast that inflation for the whole year would range between 15 percent and 20 percent, while economic growth would be between minus 2 percent and 1.5 percent.

"But these numbers all depend on what will happen with the upcoming elections. If there are serious disruptions the economy may get worse," he said.

Indonesia is scheduled to hold a general election in June and a presidential election in November, which, following the fall of former dictator Soeharto last May, are expected to be the country's first elections in a free and open environment in 40 years.

A string of massive riots and social unrest have occurred in several parts of the country, raising worries about the prospects of a peaceful political transition, particularly as the effect of last year's 13.68 percent economic contraction will be fully felt this year.

BPS also reported that exports in November 1998 totaled US$3.90 billion, bringing the January to November 1998 export total to $44.98 billion, a decline of 7.72 percent from the same period in 1997.

Oil and gas exports dropped by 32.41 percent, while non-oil and gas exports declined by 0.84 percent.

"The decline in exports was not due to declining export volume but a drop in the prices of our major export products, including oil and gas," Sugito said.

November's total exports consisted of $587.3 million in oil and gas exports and $3.31 billion in other commodities, mainly industrial goods.

The rupiah's sharp depreciation against the U.S. dollar since the middle of 1997 failed to boost the country's exports because of various problems faced by exporters, particularly their difficulties in obtaining financing for the import of raw materials.

Currency devaluation theoretically makes a country's exports more competitive on the international market.

Separately, Minister of Industry and Trade Rahardi Ramelan said in a speech read out by the head of the National Export Development Agency, Gusmardi Bustami, on Tuesday, that the high import content of most industrial exports was partly responsible for the weak export performance.

"The rupiah depreciation has failed to bolster our export competitiveness due to a high import content of between 40 and 45 percent for our industrial products," he said in the speech delivered at a seminar.

Rahardi said in the speech that non-oil and gas exports in the January to September 1998 period increased by a mere 1.51 percent, compared to an average growth of 11.6 percent during the four years leading up to 1997.

BPS reported that imports in November continued to decline, falling to $2.23 billion from $2.40 billion in October, as the sharp depreciation of the rupiah made imports more expensive.

Imports in the January to November 1998 period totaled $24.87 billion, a 35.42 percent drop from the same period in 1997.

Non-oil and gas imports, which reached $22.45 billion in the January to November 1998 period, were 35.79 percent lower than in the same period of 1997. Oil and gas imports totaled $2.41 billion, down by 31.71 percent.

BPS also reported that the number of tourist arrivals in 1998 dropped by 17 percent to 3.51 million.

Sugito said that riots and unrest across the country had prompted several foreign governments to discourage their citizens from visiting Indonesia.

He added that the country's hotel occupancy rate in November was only 39.8 percent, with an occupancy rate in Jakarta of 42.3 percent and an occupancy rate in Bali, the country's most popular destination, of 54.3 percent. (rei)